Morgan car factory in central England is battling rising costs but hopes its niche position will ensure its survival.

Morgan taps cult car status to survive

In the sprawling Morgan car factory in central England, business is brisk.

Workers in navy blue overalls hunch over aluminium chassis and wooden frames of half-completed sports cars, the floor littered with wood shavings, the air punctured by the throaty roar of engines undergoing testing.

"Good British cars are lovingly remembered, but great British cars are still being built," proclaims the Web site for enthusiasts of Morgan sports cars, www.gomog.com.

Morgan Motor Co has handcrafted its sports cars here since 1909. One of the last remaining significant sports car makers in Britain, it is battling rising costs and competition from larger rivals, but hopes its niche position will ensure its survival.

"We always want to be building cars for customers. We do not want to have cars sitting in showrooms waiting to be shipped out - that's what everybody else does, that's why there's over-production and we're seeing so many car companies go bust," Charles Morgan, the 54-year-old grandson of founder H.F.S. Morgan, told Reuters in an interview.

Most of Britain's luxury car marques have either disappeared or been swallowed up by foreign firms - US carmaker Ford Motor Co. has acquired Jaguar and Aston Martin, while Malaysia's Proton Holdings Bhd. bought Group Lotus.

The Morgan enthusiast "can cry like a baby when he finds a flea-sized scratch on his paint job, but will laugh with the rest of them when he spins out on a corner and smashes a fender", according to the Morgan lovers' website.

"You can feel the engine when it's fired up, the way the tyres are going on the tarmac - you get a real thrill out of it," said first-time buyer Simon Wakeling, 42, who is already thinking of his next Morgan purchase.

Shrinking demand and escalating costs are prompting many domestic car makers to shift output to eastern Europe where labour is cheaper, although Japanese brands Toyota and Honda have launched successful British-built models.

"Morgan will survive as it has an interesting consumer proposition. It's not a fashion product, but more of a cult classic, where demand is much less cyclical," said Harald Hendrikse, an analyst at Credit Suisse.

The brand's vintage 1930s design and tight supply commands a premium. Customers have a waiting period of 10-12 months, down from five years previously, and the company produces 600 units a year. Each car costs between STG25,000 and STG65,000 ($A60,908-$A158,399).

Charles Morgan said rising production expenses from research and development, raw materials and labour are a challenge. The company keeps a lid on costs by sourcing its parts like engines and gear-boxes from its partners BMW and Ford.

"We've made a couple of losses in the last five years due to the massive R&D expenditure in developing cars to meet US market requirements, but apart from that, we've been profitable every year that I've been here," said Morgan.

The company is also grappling with intensifying competition from larger premium manufacturers, such as Germany's Porsche AG and Daimler-Chrysler AG's Mercedes marque.

"What helps is Morgan's very protected, small market of loyal clients," said Horst Schneider, analyst with WestLB Research.

Nikolai Smolenski, the son of a Russian banker, bought independent British sports car firm TVR in 2004. Upmarket British marque Aston Martin, made famous on the big screen as fictional spy James Bond's car of choice, changed hands several times before Ford took control in 1994.

In August, Ford said it was considering selling all or part of Aston Martin to raise money for its troubled US operations. The US manufacturer also bought Jaguar, a British brand traditionally known for its leaping cat hood ornament, in 1989, but has since struggled to make money with it.

To survive the challenges, Morgan is boosting exports to the United States and western Europe, and new markets in eastern Europe, Russia, India and China, said marketing director Matthew Parkin.

The company sells 30-35 percent of its cars in Britain and exports to the United States, Germany, France, Italy, Belgium and the Netherlands.

It also aims to encourage customers to buy a second Morgan by developing new models and tweaking existing designs. Now, 40-45 percent of clients are repeat customers, up from 20 per cent nearly a decade ago, Parkin said.